PR 8-3A Bank reconciliation and entries
The cash account for Online Medical Co. at June 30, 2012, indicated a balance of $9,375. The bank statement indicated a balance of $10,760 on June 30, 2012. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $3,900.
b. A deposit of $4,000, representing receipts of June 30, had been made too late to appear on the bank statement.
c. The bank had collected $2,100 on a note left for collection. The face of the note was $2,000.
d. A check for $550 returned with the statement had been incorrectly recorded by Online Medical Co. as $500. The check was for the payment of an obligation to Hirsch Co. for the purchase on account.
e. A check drawn for $60 had been erroneously charged by the bank as $600.
f. Bank service charges for June amounted to $25.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Online Medical Co. on June 30, 2012, what amount should be reported as cash?
Answer:
1. ONLINE MEDICAL CO.
Bank Reconciliation
June 30, 2012
Cash balance according to bank statement ................. $10,760
Add: Deposit of June 30, not recorded by bank $4,000
Bank error in charging check as $600 instead
of $60 ............................................................... 540 4,540
$15,300
Deduct outstanding checks ........................................... 3,900
Adjusted balance ............................................................ $11,400
Cash balance according to company’s records........... $ 9,375
Add proceeds of note collected by bank, including
$100 interest............................................................... 2,100
$11,475
Deduct: Error in recording check ................................ $ 50
Bank service charges..................................... 25 75
Adjusted balance ............................................................ $11,400
2. Cash................................................................................. 2,100
Notes Receivable....................................................... 2,000
Interest Revenue........................................................ 100
Accounts Payable—Hirsch Co. ..................................... 50
Miscellaneous Administrative Expense........................ 25
Cash............................................................................ 75
3. $11,400; the adjusted balance from the bank reconciliation should be reported
as cash on the June 30, 2012, balance sheet for Online Medical Co.
a. Checks outstanding totaled $3,900.
b. A deposit of $4,000, representing receipts of June 30, had been made too late to appear on the bank statement.
c. The bank had collected $2,100 on a note left for collection. The face of the note was $2,000.
d. A check for $550 returned with the statement had been incorrectly recorded by Online Medical Co. as $500. The check was for the payment of an obligation to Hirsch Co. for the purchase on account.
e. A check drawn for $60 had been erroneously charged by the bank as $600.
f. Bank service charges for June amounted to $25.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Online Medical Co. on June 30, 2012, what amount should be reported as cash?
Answer:
1. ONLINE MEDICAL CO.
Bank Reconciliation
June 30, 2012
Cash balance according to bank statement ................. $10,760
Add: Deposit of June 30, not recorded by bank $4,000
Bank error in charging check as $600 instead
of $60 ............................................................... 540 4,540
$15,300
Deduct outstanding checks ........................................... 3,900
Adjusted balance ............................................................ $11,400
Cash balance according to company’s records........... $ 9,375
Add proceeds of note collected by bank, including
$100 interest............................................................... 2,100
$11,475
Deduct: Error in recording check ................................ $ 50
Bank service charges..................................... 25 75
Adjusted balance ............................................................ $11,400
2. Cash................................................................................. 2,100
Notes Receivable....................................................... 2,000
Interest Revenue........................................................ 100
Accounts Payable—Hirsch Co. ..................................... 50
Miscellaneous Administrative Expense........................ 25
Cash............................................................................ 75
3. $11,400; the adjusted balance from the bank reconciliation should be reported
as cash on the June 30, 2012, balance sheet for Online Medical Co.
